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Weekend China Trade Data

10/15/2012
On Friday, October 12, 2012, the S&P 500® Index (SPX) (Figure 1.1) closed down 2.21% for the week, capping a week of lower corrective trade targeting the all-important 1422.38 SPX technical support level. Early Saturday morning, October 13, 2012 monthly trade from China was released.
 
I would not characterize the data as a major catalyst for near-term trade. However, I expect it is further evidence that those suggesting a hard landing for China are incorrect.
 
Additionally, investors should raise their attention level once again to subsequent China economic data releases to gauge if my expectation that the current pause in China demand is, in fact, about to refresh.
 
What is very encouraging is the price action for the China yuan. Continued strength in the yuan (Figure 1.2) is a favorable condition for global capital markets and not observed nearly enough by investors. Yesterday’s 6.2658 close was not only the high for the year relative to the U.S. dollar, it also was the yuan’s highest level in 19 years. 
 
Saturday October 13, 2012 China data…
 
•  China trade surplus rose to $27.67 billion, above last month’s $26.66 billion and consensus estimates for $20.54 billion.
     o  Year on year 2012, the trade surplus is +38%
 
 
•  Overall exports rose +9.9%, well ahead of last month’s +2.7% and consensus estimates of +5.5%
 
     o  Exports to the U.S rose 5.5%, the highest reading since June’s +10.6%.
     o  Exports to the European Union fell 10.7%, an improvement from last month’s -12.7% and the month prior’s -16.2%.
     o  Exports to Germany fell 14.9%, an improvement from last month’s -16.1% and the month prior’s -18.4%.
     o  Exports to Japan rose 2.2%, an improvement from last month’s -6.7% and the month prior’s -1.0%.
     o  Exports to fellow BRIC members came in strong:
        •  Brazil +13.7%, above last month’s -14.0% and the prior month’s -3.3%
        •  India -3.5%, better than last month’s -12.1% and the prior month’s -19.9%
        •  Russia +22.3%, above last month’s +10.1% and the prior month’s +9.7%
 
•  Overall imports rose 2.4%, ahead of last month’s contraction of 2.6% and matching this month’s consensus estimate of +2.4%.
        •  Iron ore imports rose 4.1% month on month and 7.3% year on year.  
        •  The 65.01 million metric tons of iron ore imported last month is the highest import figure since the 68.97 million metric tons imported in January 2011.
 
•  Foreign exchange reserves rose to $3.29 trillion in September from $3.24 trillion in June.
 
•  M2 money supply rose 14.8%, the biggest monthly gain since June 2011.
 
Next Up for China…
 
•  The October 18 release of Q3 GDP; consensus estimates have fallen to 7.4%, which would be the weakest reading since the 6.2% print for Q1 2009 (Figure 1.3). I expect markets have also priced in that decelerating growth figure.
 
Figure 1.1 SPX Year To Date

Source: Bloomberg
 
Figure 1.2 China Yuan Year To Date

Source: Bloomberg
 
Figure 1.3 China GDP, December 2003 to Present

Source: Bloomberg

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